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CBO Releases Report on the Potential Budgetary Effects of Immediately Opening Most Federal Lands to Oil and Gas Leasing

August 9, 2012

CBO has analyzed a proposal—in a report requested by the Chairman of the House Budget Committee—to immediately open most federal lands to oil and gas leasing.

The proposal would open two categories of property now unavailable for development: (1) lands where leasing is statutorily prohibited, notably, the Arctic National Wildlife Refuge (ANWR), and (2) onshore and offshore areas that are closed to leasing under current administrative policies, including sections of the Outer Continental Shelf (OCS) and certain onshore areas in which oil and gas leasing is either restricted or temporarily prohibited. CBO estimates that about 70 percent of undiscovered oil and gas resources on federal lands are available for leasing under current laws and administrative policies.

CBO expects that opening ANWR to development would:

Yield about $5 billion in additional receipts over the next 10 years, primarily in the form of bonus payments made by private firms for the opportunity to explore for and develop resources in particular areas.

Increase royalties by roughly $2 billion to $4 billion a year during the 2023–2035 period if oil and natural gas eventually were produced from those lands. Those estimates are quite uncertain.

Provide the state of Alaska between 50 percent and 90 percent of those federal receipts if the specifications in the authorizing legislation were similar to those in recent legislation.

CBO anticipates that new legislation directing the Department of the Interior to immediately offer most other federal lands for oil and gas leasing without any restrictions would accelerate the collection of around $2 billion of future leasing receipts into the next decade. Most of that revenue would come from OCS leases, and a portion of the proceeds would be shared with state governments. CBO expects that state and local policies toward resource development, particularly in California, will play a major role in determining whether or when those resources are developed.

This report was prepared by Kathleen Gramp and Jeff LaFave of CBO’s Budget Analysis Division.